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Digital Will Play a Major Role in Under Armour's Future

Find out what the COO means by “an absolute acceleration and amplification of digital".

Kevin Plank, CEO of Under Armour(NYSE:UA)(NYSE:UAA), has long been a proponent of utilizing technology. But with Patrik Frisk, president and COO, coming on board, the company has renewed its push to take advantage of digital capabilities to help aid the company's turnaround. In the most recent earnings call, Frisk called for "an absolute acceleration and amplification of digital" in three key areas: e-commerce, connecting with customers, and the company's products.

Here's how the performance apparel and footwear brand is harnessing digital to build a stronger company.

E-commerce

As DTC relates to e-commerce, I don't know if anyone can imagine that they can put enough money toward their digital businesses today. -- Plank

As I reported a year ago, Under Armour has been investing heavily to expand its e-commerce footprint, and it's paid off. The company's direct-to-consumer (DTC) business now makes up 35% of overall revenue, up from 31% in 2016. DTC grew 14% for the full year, driven mainly by the company's e-commerce sales, which posted revenue growth in the "high teens."

The company's online success is fueling growth internationally and helped it avoid opening brick-and-mortar branded stores in countries like France. In the most recent earnings call, Frisk said that the company's hyper-growth in China is supported by "an expanding digital e-commerce business that is really resonating with the consumer."

But the company views its digital business as more than just e-commerce and is looking to use its digital platforms to build a more lasting relationship with its customers.

Natasha Hastings, a sprinter who is an Under Armour brand ambassador. Image source: Under Armour.

Connecting with customers digitally

Under Armour has a trove of data on customers, but it hasn't been able to turn this data into revenue. The company has over 200 million registered users on its MapMyFitness, MyFitnessPal, and Endomondo platforms, and its newly implemented SAP system, which provides a "single view of the customer." In the second half of 2017, the company launched a digital-only campaign for women's gear called "Unlike Any." Even with all of the data at its disposal, this marketing campaign didn't seem to have its intended effect as fourth quarter sales for women's apparel and footwear fell disappointingly short of expectations.

This opportunity shouldn't be underestimated. Nike is much further ahead in connecting with customers in its digital efforts and touts that its Nike Plus app "reserve for you" feature converts customers at a rate 40 times higher than traditional marketing. Nike's SNKRS app has a huge following with four million passionate members who have the "highest annual spend per buying member." Lastly, its loyalty programs and its Nike Plus app drive sales at three times the rate of guest logins.

Under Armour is aware of this opportunity -- Frisk said he is focused on "significantly evolving our marketing return on investment" and trying to determine what blend of traditional and digital marketing will best serve the brand. He went on to say the company is piloting digital programs and "constructing a repeatable quantitative and qualitative playbook" in order to drive a "continuous ... conversation with our consumers."

As the company is figuring out how to use the data from its connected fitness apps, it's also implementing new connected technology in its footwear that could drive revenue growth.

Connected products

The company recently launched what it's calling HOVR technology to its running shoe line, which syncs your runs to its MapMyRun app. This is not the first time the company has produced a connected shoe, but this time it seems to have gotten things right. The shoes can be used without carrying your cellphone and don't need a battery or a connection with your cellphone to work. The shoes can track speed, distance, stride length, and cadence, with or without being connected to the app on your phone. With the MapMyRun app, you can link up with other runners, have access to audio coaching and training plans, or even have friends or family track your run in real time. The only criticism that this reviewer had for the shoe was that with the small price differential, the technology should be available across more of the product line.

Using digital platforms to connect with customers is becoming more important with tech-savvy millennials approaching their peak earning years. It's good to see Under Armour making strides to capitalize on its digital properties and ensuring its marketing efforts really reach customers in ways that will pay off for the brand.

Author

Brian Withers has been a Fool since 2004 and loves to invest in solid companies that are changing the status quo and holding for the long term. Brian has been a member guide on the Fool One service since 2013. Brian's best investment has been investing in Foolish stocks with his kids since they were the young age of 5 & 7. That's 30 years earlier than he started with the Fool. When Brian is not working or writing for the Fool, you can find Brian riding his bike around central New Jersey. You can reach Brian via email: bwithbike@gmail.com.